Jindal's Commissioner, Nichols and Treasurer Kennedy in budget surplus spat

 kennedy-webcast1The Jindal versus John Kennedy budget battle continues. 

On Wednesday, the Jindal administration in advance of a legislative hearing on the budget surplus it reports slammed Treasurer John Kennedy in the administration attempts to defend itself from criticism it has been receiving since it reported ten days ago that Louisiana would end the past fiscal year with a surplus.


In response, Treasurer John Kennedy has replied with his own defense.

More fireworks will surely come as Commissioner of Administration, Kristy Nichols and the Jindal administration will be defending and its her rationale on Friday.

Here is the comment from the Commissioner and below that, the response from Kennedy:


At Friday’s budget meeting, the Division of Administration will present a budget status report that shows a $178.5 million surplus for fiscal year 2014.

The year-end report shows actual revenues and expenditures in the state General Fund at the end of the fiscal year. The revenue for 2014 includes a balance carried over in prior years that had not been included in previous year balances.

“We will get more details as we begin a more formal review, but it does appear that there was a balance carried over from prior years that should be included in this report,” said Louisiana Fiscal Officer John Carpenter.

At the end of each fiscal year, the Treasury “sweeps” agency funds that have not been appropriated or spent during the fiscal year. That money is transferred to the state General Fund. Going back as far as 2002, some of those balances were not included in year-end reports that identified the state’s surplus or deficit. While the Treasury had used the money for cash flow, it had never been reported in the year-end report presented to the Joint Legislative Committee on the Budget (JLCB).

“It’s disappointing that the Treasurer never reported these balances to the public,” said Commissioner of Administration KristyNichols.

Louisiana calculated its 2014 year-end balance on a modified cash basis, the same way it calculated the balance in previous years. This method uses the same basis of accounting as the budget adopted by the Legislature.

Commissioner Nichols said, “Treasurer Kennedy has accused the state of changing the accounting system from accrual to cash. We have not. We are using the same accounting method we have always used.”

A modified cash basis includes all cash receipts and disbursements as of June 30. Adjustments are made to include revenues that the state is legally entitled to, but has not received.  For example, sales tax revenue is recognized when the original transaction takes place, not when the state receives the revenue from the merchant (assuming it was received within 45 days after the fiscal year end).

On the expenditure side, balances are adjusted when the expense is incurred, not when the bill is paid. For example, legal services rendered in June are included in the report, even if the bill is not paid until July.

The balance that helps to make up the 2014 surplus has been collected and is currently in the state General Fund. In any accounting method - whether cash, accrual or modified cash - this balance would be included in year-end calculations.

After Friday’s JLCB meeting, the Legislative Auditor will begin the process of certifying the final numbers. The next step is working with the Legislature to determine how the surplus will be spent.

Commissioner Nichols has said that the top priorities are health care and education.  “The bottom line is that we have a surplus.  Now we have to work to ensure it is used in the most responsible, appropriate way.” 



"I woke up this morning surprised to find out I am now responsible for sweeping agency funds and crafting the state budget.  I am more than happy to take on those responsibilities if the Legislature chooses to task me with them.  In the meantime, let me clear up some distortions in statements made this morning by the Division of Administration. 

As Treasurer, I am constitutionally responsible for the custody, investment and disbursement of state funds.  It is a job that I take very seriously.  At least three times a year, the Treasury sends a comprehensive report to the administration about every penny, nickel and dime in the state general fund, and the Treasury is audited every year by the legislative auditor. 

As Treasurer, I'm NOT responsible for ensuring that the administration is truthful with legislators and the public about the amount of money that can be appropriated from the state general fund.  It is the administration's responsibility to take our reports and tell legislators and the Revenue Estimating Conference about any and all available money instead of creating a secret slush fund. 

It is clear that we spent more money than we brought in last fiscal year.  We have a $141 million deficit.  It's also clear that the administration wants to use its own secret slush fund to resolve the problem while blaming others for the mess.  

I don't blame them.  I wouldn't want to be held responsible for the bad budget practices that drove the Office of Group Benefits into financial ruin, drained the Medicaid Trust Fund for the Elderly and crippled our universities.  As Treasurer, I'll continue to be a watchdog over the people's money.  If the Legislature wants me to take charge of the budget, I will."

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